09 October 2023, by Mohamed Kaddour
The small entrepreneurs VAT exemption is a Dutch business scheme that has several advantages. The team from Taxsight explains what these are along with some of the disadvantages.
In the Netherlands, there are three different VAT rates: 0%, 9% or 21%. On top of that, you also have the so-called VAT-exempt services (medical services and certain therapists). However, the standard VAT rate in the Netherlands is 21%.
The small entrepreneurs VAT exemptionSmall businesses in the Netherlands have the option to apply for the small entrepreneurs VAT exemption (Kleineondernemersregeling). Sole proprietorships, as well limited companies (B.V.), can apply for the small entrepreneurs VAT exemption with the Dutch tax authorities (Belastingdienst).
After the business has been enrolled for the small entrepreneurs VAT exemption, it can perform services without charging VAT until a certain turnover. The services which are normally VAT-taxable could therefore become VAT exempt.
To qualify for the small entrepreneurs VAT exemption, the turnover may not exceed €20.000 per calendar year. After the request is processed, the VAT number will be withdrawn by the Belastingdienst. From the subsequent quarter, it is possible to perform services without charging VAT nor filing VAT returns, provided that the turnover remains under the €20.000 per calendar year.
Benefit of the exemptionThe benefit of the small entrepreneurs VAT exemption is that a company is able to perform services or deliver goods without charging VAT and the VAT filing obligation does not apply anymore. This is especially interesting for businesses who deliver services to individuals.
Individuals cannot, like most businesses, claim the charged VAT back. It could therefore help to reduce the fee on the services or goods delivered to individuals.
PeriodWhen the VAT exemption is granted it remains applicable for at least 3 years, provided that the turnover is kept under the €20.000 per calendar year. It is not possible to apply for the VAT number again within this period, in case the sales remain below the threshold of €20.000. When an entrepreneur exceeds the threshold of €20.000 in any calendar year, they should start charging VAT on the sales again.
Potential downsidesDuring the period where the small entrepreneurs VAT exemption applies, the company or individual is not allowed to claim any VAT on their expenses.This could be especially disadvantageous for businesses which are planning to make big investments during a certain period.
Do you have questions about this VAT exemption or another financial matters in the Netherlands? Taxsight is experienced in helping individuals and entrepreneurs with their taxes. Contact their team by phone at +31 (20) 261 3221 or by emailing [email protected].